Boscov's Update.

Pennsylvania's Top Economic Development Official ... ... has defended the state's $35 million bailout for the Boscov's department store chain, saying it was
undertaken not to save the company, but the communities where they're located.

Acting Community and Economic Development Secretary George Cornelius acknowledged that the state's action had probably opened the door for other struggling businesses to seek state assistance, but "when they come to my door, they better have a compelling case that ... they're doing it for the people of this state."

Cornelius made his remarks during an annual budget hearing before the House Appropriations Committee. They came in response to questions from Rep. John Evans, an Erie Republican, who was seeking assurances that the state's investment in the iconic department store chain would be protected.

Administration officials have said the state would have first dibs on the company's real estate and inventory if Boscov's was unable to meet its loan obligations. This morning, Cornelius made the same argument to Evans.

"It's an acceptable risk," he said.

Cornelius, who hails from rural central Pennsylvania, bristled at the characterization of state assistance as a bail-out for Boscov's.

"I've been to malls where the anchor stores are closed, and it's like a ghost town," said Cornelius, who argued that vacant malls were an indicator of a community in economic decline.

"The benefits outweigh the risk," he said. "It was a sound judgment."

Evans, though, said he was worried that the state was "opening the floodgates" to businesses that might decide that taking public money was an easier course to salvation than making painful decisions about their operations.

"You have to wonder who will be next," he said.

While acknowledging those concerns, Cornelius retorted, "I don't engage in bail-outs. This has nothing to do with Boscov's. It's about helping the people in those communities. I don't do anything for a company. I do it for the community and the employees."

Two weeks ago, officials in Butler County removed the last impediment to the bailout, voting 2-1 to extend a loan to the Reading-based company after state officials convinced them that their pledge of future Community Development Block Grants from the U.S. Dept. of Housing and Urban Development was safe.

Six counties with a strong Boscov's presence have been asked to pledge $5.83 million in future grants from HUD. Leaders in Blair, Cambria, Lackawanna, Lebanon and Schuylkill counties have also ponied up their share of the cash, now $5.83 million apiece.

Officials in Snyder County opted out last month. The cities of Reading, along with Scranton, Wilkes-Barre, Atlantic City and Vineland, N.J., also are participating.

Chain scion Albert Boscov, the company's former chairman and CEO, and other family members are putting $53 million of their own equity into the proposal. Boscov's filed for Chapter 11 bankruptcy protection last August.

The bailout is being financed through a program that allows governments to guarantee loans for economic development by using federal Community Development Block Grants.

The state must apply to the HUD for the money, DCED spokesman Steve Weitzman said. Weitzman said it's likely that Washington will take several months to rule on the application, but "we have every expectation that HUD will approve it."